41 F. Supp. 3d 323
S.D.N.Y.2014Background
- This is a qui tam FCA action in which the United States intervened against Novartis alleging kickbacks to promote Myfortic and Exjade.
- The AKS prohibits offering, paying, soliciting, or receiving remuneration to induce purchases of drugs covered by federal programs.
- The government asserts nine FCA counts (A,B,C for each drug) plus related state-law claims (unjust enrichment and payment by mistake).
- Pharmacies (not named defendants) allegedly received cash rebates and patient referrals in exchange for promoting the drugs.
- Novartis moved to dismiss for failure to plead falsity under Rule 12(b)(6) and for fraud with particularity under Rule 9(b); the court previously deferred ruling on 9(b).
- The court’s decision addresses whether the government’s theory of falsity, particularly Mikes and the 2010 AKS amendment (PPACA § 1320a-7b(g)), supports dismissal or requires repleading.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Does the 2010 AKS amendment supersede Mikes false-certification theory? | Government argues amendment clarifies, not narrows, Mikes framework. | Novartis argues amendment narrows falsity to post-2010, claim-by-claim causation. | Amendment does not narrow Mikes; Mikes remains controlling. |
| Are express AKS certifications sufficient to render claims false under Part B/Part D/New York Medicaid? | Express certifications (CMS Form 855S and subcontracts) render AKS noncompliance false. | Certifications may not require causation; argument partially contested. | Express certifications render Myfortic (Part B) and Exjade (Part D) claims false. |
| Can implied certifications render claims false for post-2010 claims? | Post-2010 implied certification of AKS compliance makes claims false. | Implied false certifications require precondition to payment stated by statute/regulation. | Post-2010 implied certifications render claims false; pre-2010 claims require express certifications (or different basis) to survive. |
| Do state Medicaid claims (beyond New York) survive on express/implied certification theories? | States’ express/implied certifications may render many Medicaid claims false. | Insufficient pleadings for non-New York states pre-2010; may require repleading. | Counts related to non-New York Medicaid pre-2010 dismissed without prejudice; remaining post-2010 viable. |
| Should state-law claims be dismissed if federal claims are dismissed? | Federal and state claims jointly asserted. | Court should decline supplemental jurisdiction if federal claims fail. | State-law claims survive; court will retain supplemental jurisdiction. |
Key Cases Cited
- Mikes v. Straus, 274 F.3d 687 (2d Cir.2001) (defines ‘false or fraudulent’ claim as one aimed at extracting government payment; split into factual and legal falsity; false certification theory stems here)
- United States ex rel. Kirk v. Schindler Elevator Corp., 601 F.3d 94 (2d Cir.2010) (reaffirms false certification theory of legal falsity under Mikes)
- U.S. ex rel. Wilkins v. United Health Group, Inc., 659 F.3d 295 (3d Cir.2011) (adopts false certification approach across circuits in AKS contexts)
- Hutcheson v. Blackstone Med., Inc., 647 F.3d 377 (1st Cir.2011) (treats AKS compliance as precondition to payment for purposes of FCA falsity)